March 9, 2016 5:44 pm

Growth of mobile phone apps threatens UK bank branches

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Mobile phone apps are helping to kill off the British bank branch network as customers move online.

The number of times people visit a branch is set to almost halve over the next four years, with more turning to mobile banking, according to consultancy firm CACI.

Research by the group shows that current account customers visited their bank branch 427m times last year, compared with 895m logins on a mobile app and 705m on a computer.

However, the number of branch visits is expected to fall to 268m by 2020, while mobile app usage is on track to more than double to 2.3bn. Computer banking usage is also set to decline to 528m.

The forecasts come as high street banks continue to reduce their branch networks in an attempt to cut costs radically and improve returns for shareholders.

Lloyds Banking Group, for example, said in February that it would close 29 branches in the next few months as part of plans unveiled in 2014 to shut 200 across the country over three years.

After Barclays posted a net full-year loss of £394m last week, Jes Staley, its chief executive, said the bank “has not reduced its real estate footprint since the crisis” and that there are “tremendous savings for us to do so”.

A number of mobile-focused lenders are poised to emerge, with Atom Bank, one of the first, due to launch in the coming weeks.

However, a number of communities risk losing their only branch. The Campaign for Community Banking has said that 124 “last in town” branches closed in 2014.

But some experts believe digitising certain banking services benefits customers and banks.

Ian Goodliffe, a partner at CACI, said digitising transactions such as moving money between accounts or changing address details helps cut time for customers and costs for banks.

But banks risk alienating profitable customers by turning purely to digital services, he warned. Affluent professionals who are able to use technology might still want a conversation with a banker rather than be forced to use a digital-only service.

“If banks are pushing customers out of the branch, how are they going to speak to them? They risk losing the human touch, and that’s something we underestimate,” Mr Goodliffe said.

“There is certainly still a place for branches in the future. We have more than 10,000 branches but we don’t need that many. In 10 years’ time I suspect the number will be half,” he said. “But the format and purpose of them needs to evolve to take into account their size, facilities, staffing and opening hours.”

A number of banks and building societies are overhauling the structure of their branches to adapt to changing customer needs. Nationwide, for example, launched a high-definition video link across 400 of its branches to provide customers with instant access to a mortgage adviser if none was available at the branch.

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